So what is a ‘Small’ Business?
Are you confused about the various ‘Small’ Business thresholds, rates and reporting requirements?
It’s little wonder. The Federal Government has created various definitions of what is a small business and that’s just in the tax law! No doubt a myriad of legislation exists around various Governments throughout Australia.
If we ponder the tax rules for a moment, how do you know if your business is ‘Small’? What are the various thresholds and rates that apply? We have highlighted the most common thresholds and rules below:
$2 Million – Small Business CGT Concessions
If your business has a turnover of below $2 Million, then when it, or a business asset is sold, you may be able to access the small business CGT concessions which provide a range of tax benefits related to CGT:
- 15 year exemption – tax free
- 50% Small Business Reduction
- Retirement Exemption – up to $500,000 per individual tax-free
- Roll-over (deferral)
$5 Million – Unincorporated Small Business tax discount
If your business has less than $5 million turnover and you are an individual, partnership of individuals, or trust with individual beneficiaries, there may be a discount of 8% of tax payable of your small business income up to $1,000 per individual taxpayer.
$6 Million – Small business CGT Concessions
The $6 Million is a net assets test. If your business has more than $2 Million turnover, you may still be able to access the concessions if the taxpayer (and connected entities and affiliates) have net assets of less than $6 Million.
$10 Million – Small Business Entity - Business Concessions
The Small Business Entity (SBE) rules (applying to businesses with an aggregated turnover of less than $10 Million) apply to all business types and provide a range of concessions for businesses including:
- Simplified Depreciation rules including $30,000 instant asset write-off
- Deductions for professional expenses for start-ups
- Immediate deduction for pre-paid expenses
- Simplified trading stock rules
- Two-year ATO amendment period (rather than four)
- Simpler GST – BAS reporting
- PAYG Instalment Amount
- FBT Car parking exemption
- Use of superannuation clearing house
$20 Million – R&D Tax Offset – Refundable
Companies conducting R&D with turnover below $20 Million can claim a refundable tax offset of 43.5% of the R&D expenditure (non-refundable for other companies).
$50 Million – Base Rate Entity threshold for lower company tax rate – 27.5%
Companies with aggregated turnover of less than $50 Million and with 80% or less of their income is passive income only pay tax at the lower tax rate of 27.5% (other entities 30%).
$50 Million – Instant Asset Write-off
From the time of the 2019 Federal Budget up to 30 June 2020, entities with an aggregated turnover of less than $50 Million can also claim an instant write-off for assets costing less than $30,000 plus GST.
The myriad of these definitions, thresholds, concessions and rates can leave many businesses confused, so leave it to the experts.
The thresholds, concessions and rates are correct at date of publication – 2 August 2019, however, it is important to keep in mind that tax law is constantly changing.
If you would like clarity about whether your business is classified as a ‘small’ business or would like to confirm which concessions you’re able to claim, contact your usual Mazars advisor or alternatively our tax specialists on:
Brisbane – Jamie Towers
Melbourne – Evan Beissel
Sydney – Gaibrielle Cleary
+ 61 7 3218 3900
+61 3 9252 0800
+61 2 9922 1166
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.